Facing hundreds of sex abuse lawsuits, Albany Diocese to declare bankruptcy

Denver, Colo., Mar 16, 2023 / 09:47 am

The Catholic Diocese of Albany has decided to file for bankruptcy, saying a financial reorganization will help provide some compensation for the hundreds of sex abuse victims who have filed lawsuits.

“I understand this filing causes uncertainty, but as a Church and a community of faith, we must recognize that victim-survivors are our sons and daughters, and our brothers and sisters, and all of us, without exception, must work together to find ways to help them,” Bishop Edward B. Scharfenberger of Albany said in a March 15 statement. 

“It’s a natural thing for us to do, especially for those who have been hurt by an institution we are all called to be a part of. We must reach out to all and journey with them through the healing process,” the bishop’s statement read.

Parishes and schools are not part of the filing and are incorporated as different entities, the bishop said.

“It is very important for me to point out that the mission and ministries of the diocese and parishes will continue during the reorganization proceedings,” he said. He asked for prayers “for all involved, that God’s peace and healing can prevail.”

Scharfenberger said the diocese has been named in more than 400 lawsuits filed from August 2019 to August 2021 under the Child Victims Act of 2019. The act allowed a retrospective one-year “look back” window during which alleged abuse victims could file lawsuits long after the statute of limitations had ended. Then-Gov. Andrew Cuomo extended the window through 2021, citing the obstacles caused by the coronavirus pandemic.

The diocese has settled more than 50 of these lawsuits. Settlements have been “large” and the “limited funds” have been depleted, the bishop said.

Chapter 11 bankruptcy will ensure “some compensation” for all abuse victims with pending litigation. The collection of debts and legal actions against the diocese will halt and a reorganization plan will determine available assets and insurance carrier participation “to negotiate reasonable settlements” with abuse victims and other creditors.

There is no timeline for the Chapter 11 bankruptcy, the Albany Diocese said in a statement. Other reorganizations have continued for several years. Bankruptcy reorganization plans usually must be approved by the affected creditors, including lawsuit plaintiffs, and also by the bankruptcy court.

The bankruptcy announcement follows months of negotiations between attorneys for the diocese and for the plaintiffs. Several attorneys for plaintiffs complained that the diocese’s offer of a global settlement fell far short of a reasonable amount and alleged that the diocese’s attorneys had obstructed the legal discovery process, the Albany Times-Union reported.

Scharfenberger took office in 2014. According to the diocese’s website, the Albany Diocese serves about 316,000 Catholics in a population of 1.4 million. About 68 diocesan priests are in active ministry, the diocese’s website reports.

The Albany Diocese joins five New York dioceses that have declared bankruptcy amid the lawsuits brought under the Child Victims Act. The other dioceses are Rochester, Syracuse, Buffalo, and Rockville Centre.

The St. Clare Hospital pension fund is also a subject of lawsuits. More than 1,100 former employees of the closed Schenectady hospital lost some or all of their retirement savings when the fund emptied in 2019 as a result of a decision in the 1990s to drop the fund’s federal pension insurance protection, WAMC Northeast Public Radio reported. The hospital, which shut down in 2008, operated under the diocese. A 2019 lawsuit against the diocese seeks damage on behalf of the pensioners.

Though these lawsuits will be halted, Scharfenberger said this was not the diocese’s aim for filing the bankruptcy.

A special section on the Albany Diocese’s website addresses the reorganization. The bishop pointed to information on the diocese’s child protection and safe environment resources and its Hope and Healing effort for abuse survivors.

“I apologize to the victim-survivors and their families for the inexcusable harm that was done to them by those in positions of trust,” he said. He emphasized the dioceses’ commitment to its programs for victim-survivors, including work to facilitate mental health services and to provide opportunities for spiritual healing.

“They are part of our community in Christ, and as a Church we are called to share his love, to be his heart in the world today,” the bishop said of abuse victims.

Albany’s Bishop Emeritus Howard Hubbard, who led the diocese from 1977 until 2014, gave a deposition made public in March 2022 in which he admitted that he did not report several instances of alleged sexual abuse of minors by priests, instead choosing to keep the allegations quiet and to refer the priests for treatment.

Hubbard has defended his response to abuse cases, saying that it was “common practice” in the 1970s and 1980s to act as he did, though he acknowledged that his failure to notify the parish and the public when a priest was removed from or restored to ministry was a “mistake.” 

In a majority of the cases “the victims themselves did not want to make the matter public and many times sought confidentiality through their attorneys.”

A March 2021 lawsuit has accused him of abusing a boy in 1977, an allegation that he has denied. Hubbard has asked the Vatican to permanently remove him from the clergy, contending he can no longer serve in public ministry.